By Yusef Taylor, @FlexDan_YT
The Gambia passed a Supplementary Appropriation Act 2020 on 22nd July totalling D2.8 Billion Dalasis. This has raised the Government’s total expenditure to D24.1 Billion. The initial Supplementary Appropriation Bill tabled by the Minister of Finance was more than D3.4 Billion meaning that the Bill was cut by D541 Million. This article details where the cuts and additions were made to the Bill (D3.4 Billion) culminating with the Act (D2.8 Billion) approved by the National Assembly. The main impacts of the Supplementary Budget are also discussed.
Supplementary Budget otherwise known as Supplementary Appropriation is an additional sum of money requested by the Finance Minister if “economic and social conditions require larger expenditures than the original and revised budgets allow”. This is a familiar process in The Gambia. Finance Lecturer at the University of the Gambia, Lamin Dampha currently the Chairperson of the Center for Policy, Research and Strategic Studies, CePRaSS, recalled that “we have seen in 2018 almost few weeks before the end of the year the Government coming up with a very interesting Supplementary Bill”.
In this article, the Bill refers to the D3.4 Billion Supplementary Appropriation Bill tabled by the Finance Minister and the Act refers to the D2.8 Billion Supplementary Appropriation Act approved by the National Assembly.
One of the most contentious points is the Finance Minister’s decision to table a Supplementary Budget instead of a Revised Budget. According to an experienced Economist and former Cabinet member, “it would be advisable to revise the original budget than to introduce a Supplementary Budget of loan financing”. Provision 30 (1) of the Public Finance Act 2014 gives the Minister the authority to “submit a revised budget to the National Assembly”. Provision 30 (2) of the Public Finance Act also requires the Finance Minister to table a Supplementary Budget if “larger expenditures than the original and revised budget” are required.
D3.4 Billion Supplementary Appropriation Bill
Having attended a committee meeting of Parliament’s FPAC in April this year, I witnessed some National Assembly members requesting for the Finance Minister to table a Revised Budget instead of a Supplementary Budget. To find out why the change of approach I conducted an exclusive interview with Hon. Sankung Jammeh of Foni Jarrol who is also a member of the FPAC. He explained that the [Supplementary Appropriation] SAP was initially “recommended to the [Finance] Minister last December [2019] when an amount relating to Kharaffi payment was omitted from the budget and it was too late to be added and members concurred that he should leave the budget as-is and come in 2020 with an SAP”.
According to Finance Minister Hon. Mambury Njie “the focus of this Supplementary Budget proposal is on covering costs arising from the need to combat the Corona Virus outbreak, as well as other essential and urgent budgetary needs that are directly or indirectly related to the pandemic. Furthermore, there is a need to support the private sector, in particular, the Tourism and Hospitality sector, so they may cope with the effects of the pandemic.”
“The Supplementary Estimates is also formulated to address specific needs that may not necessarily be associated with the Covid-19 Pandemic, including payments owed to Kharafi and Shapoorji, Rehabilitation of the Basse and Brikama Markets, construction of a Mausoleum for our founding father, the late Sir Dawda Kairaba Jawara, Rural roads project, Recapitalizing the Central Bank, and the settlement of the International Trade Finance Corporation (ITFC) facility on behalf of the Gambia Groundnut Corporation (GGC).”
According to Hon. Jammeh “the minister was asked by the FPAC to put the DK Jawara Mausoleum in the 2021 Budget”. The final expenditure list we obtained from our sources indicates that it has been removed from the Act. See table below for of the final approved expenditure list.
Parliament’s FPAC Report on SAP Bill
After the Finance Minister tabled the D3.4 Billion Bill the National Assembly’s FPAC held a meeting to review the Bill and filed a report revising the Bill down to “D2,605,456,182.05, as opposed to the original sum of D3,386,250,000.00”. After the report was tabled and adopted with amendments, Parliament approved the Act totalling D2,845,000,000.
This means that an additional D240 Million was added to the amount recommended by the FPAC Committee. I asked Hon. Sankung Jammeh on the reason for this additional expenditure and he explained that “the difference was an adjustment from the Ministry of Finance on debt repayments”. He added that “the member for Serrekunda West recommended for assistance to be extended to media houses and most members accepted the proposal and these two increased the sums from what FPAC recommended.” Below is a chart showing all the additional items that were approved by the National Assembly.
D865 Million Added to D2.8 Billion Act
Detailing the reasons that Parliament added D865 Million to the Act, Hon. Jammeh recalled that “the Ministry of Works wanted more than the D500 million on the SAP and through engagement with other ministries, some cuts were made and the savings put back to Rural Roads that most members were asking for the past three years but due to budgetary constraints, they couldn’t be done.” In addition to that, “the Ministry of Health was not factored in by Ministry of Finance and Economic Affairs (MoFEA) as they were yet to exhaust the D500 Million but the committee decided to put that amount because they needed to renovate some clinics and may need additional funding if Covid-19 cases continue to rise”.
“The 2, 3- and 6-month salaries to the councils were captured under the Ministry of Local Governments. The debt repayment was agreed on the floor and cannot be on the report. The Financial oversight board amount was also on the report” said Hon. Jammeh.
However, the Secretary-General of the Center for Policy, Research and Strategic Studies (CePRaSS), Ms Adama Touray opines that the items added to the Act “highlight the fact that the government is not transparent with its expenditures as well as its intentions with the Supplementary Appropriation Act”.
D1.4 Billion Removed from D3.4 Billion Bill
Considering that the Minister indicated that the Supplementary Budget was to combat Covid as well as other essential and urgent budgetary needs that are directly or indirectly related to the pandemic, I was surprised to observe that over D1.3 Billion earmarked for Humanitarian Relief and Procurement of Medical Equipment was removed from the Bill. Speaking about this omission Hon. Jammeh highlighted that these expenditures “were already disbursed through virement and therefore, does not qualify for the Supplementary Budget”. Below is a chart showing all the items removed from the D3.4 Billion Supplementary Bill.
More Loans More Indebtedness
Often one of the least discussed issues is the source of funding for the Supplementary Act. According to information at our disposal, over 52% of the funds are loans from the International Monetary Fund’s Rapid Credit Facility (D1.05 Billion) and the International Islamic Trade Finance Corporation (D435 Million). Meaning that less than 48% of the remaining funds are from grants from the European Union (D952 Billion) and the African Development Bank (D408 Million).
When I asked Hon. Jammeh why Parliament didn’t just go for the D1.36 Billion in Grants and reject the D1.49 Billion Loans, he said: “The Gambia has been taking loans to finance various projects in the country and the previous governments have done the same”. In his view “the only way we can reduce or stop it is to increase government revenue and then there will be no need to take them. However, if we have to take them, they must have low to zero interest.”
However, Researcher Mr Dampha believes that “it’s very important at this point that government reprioritise the way of its expenditure, such that we try to limit unnecessary spending, otherwise it’s going to hunt us in the future.”
D435 Million “Revolving Door” ITFC Loan
The presence of the Islamic Trade Finance Corporation (ITFC) Loan in the source of funding and also on the expenditure list was strange to me at first. In my layman understanding, it did not make much sense to take a loan this year and pay it back in full within a year. However, when I asked Hon. Jammeh about this he explained that “this is a revolving loan provided by ITFC to [Gambia Groundnut Corporation] GGC to allow them to be able to buy fertilizer, the government gives them subsidy so that they can sell them at a lower price.”
A revolving door loan is a loan which is paid within a short period. In this instance, the Gambia is taking a loan of D435 Million and paying back D435 Million. Researcher Adama Touray also thinks “this is fine as far as my understanding of revolving loan is concerned. If they [Government] can pay the full amount of the loan in the same year, that’s okay” she says.
No Grace Period or Yearly Payments?
When I asked Researcher Ms Touray, why there was no grace period or yearly repayments for a loan of this magnitude she explained that “if it’s a short-term loan, the grace period might not be in years but rather in months (6 months probably). Also, if it’s a short-term loan, there will be no yearly repayment of a percentage of the loan but monthly repayments”. The best-case scenario is “if the government can pay back after selling all the groundnut they bought from the farmers in addition to the fertilizers then there is no need for worry” she says.
Impact of D2.8 Billion Supplementary Appropriation Act
When I categorised the funds into four categories it can be seen that a significant amount will be project-related expenditure. A hopeful Hon. Jammeh believes that “the impact will not be significant [on the Economy] as some rural roads can be started and continued in 2021 and beyond depending on the budget allocation”. He argues that “the food aid will help poor farmers and the availability of low-cost fertilizer can boost production.” In his view “the Ministry of Health will be in a better position to fight the pandemic. The area councils especially poor ones will be able to keep their employees and pay them”.
The results of the reclassification exercise shown below indicate that only 22% will be utilised for direct Covid 19 expenditure. One could argue that a significant amount of subvention could be due to the Pandemic, however, the Government has long had a history of requesting for subventions in previous Supplementary Budget requests. Debt repayments are rank second over Covid Expenditure, with debts expected to consume over 29% of the D2.8 Billion Act approved by Parliament.
Speaking about the impact of the Act on the Economy, Researcher Lamin Dampha highlighted that for the Gambia “what we spend is more than what we get” leaving Government with no option but to “go in for borrowing, domestic borrowing for example, or going for international organisations”. The University Lecturer is concerned that this will “increase Gambia’s indebtedness in terms of loans.” One criterion highlighted previously is the Debt to GDP ratio which he believes will be seriously affected as the loans continue to mount, in his view this “is not good for our economy”.
Something which may have gone amiss but could catch up with the Gambia is fulfilling its convergence criteria to join the new Economic Community of West African States (ECOWAS) currency, the ECO. According to a State House press release “the Gambia has consistently achieved one of the two criteria, missing the public debt-GDP ratio.” A publication by World Economic Forum indicates that qualifying ECOWAS Member States must have a “public debt of no more than 70% of GDP” amongst five other convergence criteria. Unfortunately, the Public Debt Bulletin published by the MoFEA in March 2020 places the country’s debt to GDP Ratio at “80.1 per cent as at end 2019” 10% higher than the convergence criteria.
Perhaps the impact will depend on exactly what the Government decides to spend the money on. Our retired Economist believes the impact of the Act will “depend on the utilization and targeting of the expenditure if they are to address the shocks, negative implications to mitigate and alleviate the effects (health, economic, social, security) of the Pandemic, then the Supplementary Budget could be justified. Otherwise, it wouldn’t be justified”.
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A demonstration appropriating assets notwithstanding those generally sanctioned in a yearly allotment act.
Supplemental allocations give extra spending authority normally in situations where the requirement for reserves is too critical to even consider being deferred until the order of the ordinary assignment bill.